Ventas Inc. agreed to acquire a C$2.4 billion portfolio of 31 class A seniors housing properties and four in-progress developments in Quebec in an 85/15 equity partnership with Le Groupe Maurice.
Le Groupe Maurice will continue to manage and further develop the portfolio under its brand, and Ventas will have exclusive rights to fund and own all additional developments, the real estate investment trust said in a news release.
Ventas said the acquired portfolio includes 28 stable, institutional-quality, apartment-like properties containing 7,885 units in high-density core urban markets, with occupancy of nearly 97%. It also includes a lease-up portfolio of three assets opening in 2019, containing 1,032 units. The company expects the 31 properties to deliver 4% compound annual growth in net operating income over the next five years.
The four in-progress developments, in Montreal, are expected to contain about 1,400 units and are projected to open in late 2020 and in 2021.
The transaction is expected to be neutral to 2019 normalized funds from operations on a per-share basis, and accretive to 2020 normalized FFO by about 3 cents per share. Its total value includes assumption of C$1.3 billion of debt.
Ventas estimated the yield on the C$2.0 billion purchase of the 28 stable assets at 5.5%, with a similar stabilized yield on the purchase of the lease-up assets. The estimated stabilized yield on the four in-progress developments is 6.5%, the company said.
The transaction increases Ventas' pro forma Canadian portfolio to 76 properties from 41 and is expected to increase the NOI contribution from Canadian assets to 7% of Ventas' total NOI. NOI from the company's Canadian seniors housing operating portfolio is expected to represent 21% of Ventas' total seniors housing operating portfolio NOI.
With the transaction, Le Groupe Maurice would become a top-10 operator for Ventas, representing about 4% of the REIT's pro forma NOI by the end of 2019.
Ventas launched a public offering of 11.0 million common shares to help fund the portfolio acquisition.
Based on the company's June 3 closing stock price of $64.15 per share and assuming the full exercise of the underwriters' 30-day option to buy up to 1,650,000 additional shares, gross proceeds from the offering are expected to total about $811.5 million. Any remaining net proceeds not used for the acquisition will go toward working capital and other general corporate purposes.
The deal is expected to close in two phases. The first, with a planned close early in the third quarter, includes a C$987 million bridge loan from Ventas to Le Groupe Maurice to enable the seller to buy out its current private equity partner. The second phase, full investment and partnership closing, is subject to the satisfaction of certain conditions and regulatory approvals and is also expected in the third quarter.
TD Securities is serving as exclusive financial adviser to Ventas, and Osler Hoskins & Harcourt LLP is serving as legal adviser. National Bank Financial Inc. is serving as exclusive financial adviser to Le Groupe Maurice, and McCarthy Tetrault LLP is serving as strategic and legal adviser.
Morgan Stanley, Citigroup and J.P. Morgan are the joint book-running managers for the offering.